OWNING THE WORLD'S BIGGEST ESPORT: INTELLECTUAL PROPERTY AND DOTA.

• Author: Tan, David Nathaniel
• Position: Defense of the Ancients video game

TABLE OF CONTENTS I. INTRODUCTION 965 II. A PRIMER: ESPORTS AND DOTA 966 A. eSports: Rising from the Ashes 966 B. The Significance of DotA 968 1. The "Kill" Era of DotA 969 3. The "Icefrog" Era of DotA 970 4. DotA Legacies: From Community Ownership to Corporate Dominance 970 III. INTELLECTUAL PROPERTY CASES INVOLVING DOTA 972 A. Blizzard v. Valve (The DOTA Trademark) 972 B. Blizzard v. Lilith (The DotA Copyrights) 975 1. The Existence of the DotA Copyrights: A Question of Law 976 2. The Ownership of the DotA Copyrights: A Question of Fact 977 3. The Validity of DotA's Assignments: A Question of Fact 978 IV. BUSINESS IMPLICATIONS OF THE DOTA STORY 980 A. The Fate of the DOTA Trademark 980 B. The Fate of the DotA Copyrights 983 C. Lessons from DotA: What Should Businesses Do? 986 V. CONCLUSION 989 I. INTRODUCTION

Electronic Sports--or eSports--is a booming industry. In 2017, global revenue grew by 41% to $696 million. (1) Market research firm Newzoo estimates that the industry will be worth $1.5 billion by 2020. (2) The lion's share of revenue growth stems from "brand investment revenues"--media rights, sponsorships, and advertisements. (3) Media rights, of course, include intellectual property ("IP"). As the eSports market develops, so too will the IP law protecting that market, and the business strategies exploiting those protections.

Part II of this Note explores a small slice of the developing legal landscape of eSports, beginning with a brief overview of eSports history. Then, it dives into the history of Defense of the Ancients ("DotA") (4), a fan-made video game modification from which the world's biggest eSports spawned. Next, Part III explores two cases that dealt with DotA's ownership. The first resolved a dispute between two major video game companies--Blizzard and Valve--over the DOTA trademark. The second set the stage for a battle over the amorphous copyrights of the growing DotA franchise. Taken together, these two cases provide a tentative answer to the question: does anyone own DotA?

Finally, with the legal history of DotA as a guide, Part IV addresses the business aspect of eSports IP. While undoubtedly financially valuable, securing IP rights to video games may, as in the case of DotA, comes with trade-offs. In securing user-generated IP, a video game company must consider how to craft a proper end user license agreement ("EULA") that encourages creativity yet maintains control over potential blockbusters. Perhaps more importantly, a company needs to understand how securing user-generated IP will impact its consumer base.

2. A PRIMER: ESPORTS AND DOTA

   1. eSports: Rising from the Ashes

      The popularity of video game tournaments is not new. The first video game tournaments emerged in the 1980s, with magazines such as Life covering such events. (5) The nascent video game industry, represented then primarily by arcade machines, was worth over $8 billion. (6) However, as technology developed, the scene shifted from the arcade to home media. By the 1990s, local area network ("LAN") parties had replaced the arcade scene. (7) Video games simultaneously became more private and more communal. (8) Tournaments were relegated to a form of advertising for these home video game systems. (9)

      The evolution of video game tournaments to eSports begins with video game tournaments transitioning from a form of advertising, to events in and of themselves. In the late 1990s, companies that had a stake in the video game industry began to sponsor video game leagues. (10) Each league was sponsored by several industry giants. (11) These leagues used the enthusiasm of the players to promote competitive video gaming, thereby bolstering the market for high-end hard-ware. (12) An unforeseen consequence of this business strategy was the incubation of esports.

      In 1998, the PGL league's prize pool was a modest $250,000 split between two games. (13) Prize pools remained relatively stagnant--for example, in 2007, the CPL league, by then an industry leader, offered $300,000. (14) But in 2011, just four years later, video game company Valve announced a staggering $1.6 million prize pool for its capstone tournament, The International ("TI"), which featured its new video game Dota 2. (15) In one event, eSports became a million-dollar industry.

      The industry continues to grow tremendously. In 2017, the seventh TI tournament, TI 7, boasted a prize pool of over $23 million (16)--representing a 1400% increase in prize pools over six years. The winning team took home around $11 million. (17) The significance of this prize pool is clearer when compared to a more established sport: golf. In golf, performance, rather than employment contracts, drives compensation. (18) This is largely true in eSports, (19) at least for the time being. The winner of the 2017 U.S. Open golf tournament--one of the four major golf tournaments (20)--brought home just under $2.2 million. (21) Split between five team members, each TI 7 winner could potentially earn $2.2 million. (22) While eSports may have some catching up to do with other, more lucrative sports, (23) the cultural, economic, and legal impact of eSports will undoubtedly continue to grow. At the center of this industry is the progenitor of Dota 2, the community-made video game modification DotA. (24)

   2. The Significance of DotA

      TI, now an established series of annual tournaments, dominates the eSports industry. These tournaments, and thus Dota 2, represent the top four largest prize pools in eSports history. (25) The fifth largest prize pool, at a respectable $5 million, came from the 2016 League of Legends ("LoL") World Championship. (26) Dota 2 and LoL share a fascinating history: they both trace their roots to the video game modification DotA. (27) This Section discusses the intertwined history of Dota 2 and LoL, beginning with their progenitor, DotA. It then outlines other video games that spawned from the DotA universe.

      1. The "Eul" Era of DotA

         DotA began as a mod for Blizzard's award-winning video game, Warcraft III. (28) Warcraft III included a "World Editor," which enabled players to create new settings, maps, and characters using the game's engine. (29) In 2002, a modder--known then only by his screenname "Eul"--created DotA. (30) The Eul era established the basic mechanics of DotA: the win condition, "setting, heroes, rules, and name." (31) Because Warcraft III mods were all open source, Eul deliberately "locked" his mod by corrupting certain data elements to prevent unauthorized access. (32) However, in 2004, Eul retired from the scene, "unlocking" his mod and announcing, via a forum post: "from this point forward, DotA is now open source. Whoever wishes to release a version of DotA may without my consent, I just ask for a nod in the credits to your map." (33) This ended the Eul era of DotA.

      2. The "Guinsoo" Era of DotA

         Another then-anonymous modder, "Guinsoo," combined several DotA mods and used them as the base of his own line of mods. (34) By early 2005, Guinsoo's version of DotA was becoming the "dominant" mod in the Warcraft III scene. (35) This began the Guinsoo era of DotA. Under his leadership, DotA grew from a mod into a community. (36) Unlike Eul, Guinsoo incorporated features--such as design work and programming--created by other people. (37) Indeed, Guinsoo considered himself "a 'chieftain' of sorts." (38)

         Under Guinsoo's reign as DotA's "chieftain," a system of norms developed. Contributors had varying levels of input, creating different tiers of input and authority. (39) Guinsoo then had final authority to decide what went into the next version of DotA. (40) Finally, Guinsoo gave credit where credit was due. (41) And in 2004, under Guinsoo's tenure, the first DotA league was born. (42)

      3. The "Icefrog" Era of DotA

         By 2005, Guinsoo had passed the reins to "Neichus." (43) Neichus brought in experienced programmer and community member "Icefrog" to be his co-developer. (44) Soon after, Neichus left the project, making Icefrog the sole successor to Guinsoo. (45) In contrast to Guinsoo's "somewhat informal" oversight, Icefrog "regularly enlisted a team of helpers." (46) Community member "Pendragon" helped maintain the player base through a website, DotA-allstars.com. (47) Under Icefrog's leadership, DotA's competitive scene slowly came to be, with 2006 marking the beginning of a rapid rise in the number and prize pools of DotA tournaments. (48)

      4. DotA Legacies: From Community Ownership to Corporate Dominance

         From freeware to community to leagues and finally, to tournaments, DotA had come a long way. But that was just the beginning. In 2005, Blizzard, the owner of Warcraft III, launched Blizzcon, its seminal video game convention. (49) While Blizzard spent most of the convention promoting its new games, it also had an unusual offering: a DotA tournament. (50) Blizzard hosted a game that it had not created. Blizzcon 2005 revealed that corporations were now interested in this community-created video game.

         In 2006, video game development company S2 Games recruited Icefrog to work on a stand-alone game called Heroes of Newerth ("HoN"). (51) HoN is just one of many professional-grade successors to DotA, including LoL by Riot Games ("Riot") and Dota 2 by Valve. (52) Original members of the DotA community also supported these games. Riot employed Guinsoo and Pendragon. (53) Valve recruited Eul and, after his tenure at S2, Icefrog. (54) Late to the party, Blizzard, developer of the base game Warcraft III, released in 2015 its own spin on DotA--Heroes of the Storm ("HotS"). (55) With all of these games derived from DotA, there was one obvious question: did anyone own DotA?

3. INTELLECTUAL PROPERTY CASES INVOLVING DOTA

   1. Blizzard v. Valve (The DOTA Trademark)

      Blizzard and Valve were--and still are--industry giants. Blizzard's video game portfolio currently consists of 20 released video games; (56) Valve, 18. (57) In 2010, Blizzard, a subsidiary of publicly traded company Activision...